Inductive cell-cell interactions are essential for controlling cell fate determination in both plants and animals1; however, the chemical basis of inductive signals in plants remains little understood. A proteoglycan-like factor named xylogen mediates local and inductive cell-cell interactions required for xylem differentiation inZinniacells culturedin vitro2,3. Here we describe the purification of xylogen and cloning of its complementary DNA, and present evidence for its rolein planta.The polypeptide backbone of xylogen is a hybrid-type molecule with properties of both arabinogalactan proteins and nonspecific lipid-transfer proteins. Xylogen predominantly accumulates in the meristem, procambium and xylem. In the xylem, xylogen has a polar localization in the cell walls of differentiating tracheary elements. Double knockouts ofArabidopsislacking both genes that encode xylogen proteins show defects in vascular development: discontinuous veins, improperly interconnected vessel elements and simplified venation. Our results suggest that the polar secretion of xylogen draws neighbouring cells into the pathway of vascular differentiation to direct continuous vascular development, thereby identifying a molecule that mediates an inductive cell-cell interaction involved in plant tissue differentiation.